TOPIC 4: GOVT INTERVENTION & THE LABOUR MARKET

Question 1

[Definition] Consumer Surplus

Answer 1

Consumer surplus is the DIFFERENCE between the MAXIMUM AMOUNT that a consumer is willing and able to pay for a good and the amount that he ACTUALLY PAID for the good

Question 2

[Definition] Producer Surplus

Answer 2

Producer surplus is the DIFFERENCE between the MINIMUM AMOUNT that a producer is willing and able to sell the good and the amount that he ACTUALLY RECEIVES for the good

Question 3

[Definition] Price Ceiling

Answer 3

A price ceiling is a legally established maximum price. This means that producers are prohibited from selling the good above the maximum price set.

Question 4

[Definition] Price Floor

Answer 4

A price floor is a legally established minimum price. Firms affected are permitted to sell the goods at prices at or above the minim price.

Question 5

[Definition] Quotas

Answer 5

Quota is a quantitative restriction on a output that is imposed by the government through legislation and regulation.